WRAPUP-France Telecom confident will clinch Orange
By Sophy Tonder and Alexander Smith
LONDON, May 26 (Reuters) - France Telecom is confident of wrapping up a deal to buy British mobile phone company Orange from Vodafone AirTouch Plc (quote from Yahoo! UK & Ireland: VOD.L) by Monday following intensive weekend talks, its bankers said on Friday.
``I think its pretty much a done deal now -- both parties seem keen to do it,'' said a banker close to the deal, adding that France Telecom hoped to annouce it on Tuesday.
Bankers see the French group's chances of success rising, with other potential bidders, notably Dutch KPN Telecom NV , not yet ready with the financing to counter what some are describing as a ``knockout bid''.
France Telecom and Vodafone declined to comment on whether the two had entered a period of exclusive talks, while KPN told Reuters it remained interested.
Orange is expected to fetch up to 50 billion euros ($45.83 billion), providing Vodafone with a much-needed cash boost.
France Telecom has been pushing hard for short-term exclusivity on the sale, effectively freezing out other bidders during a period of intense talks with Vodafone, which must sell Orange as part of it takeover of Germany's Mannesmann AG.
Some investment bankers said that tactically, Vodafone would only want to give France Telecom the most slender of windows in order to put pressure on the French group, while also raising the heat on other potential bidders to show their hand.
While Vodafone would like to have the Orange issue settled and cash in its pocket, it does not have to sell to anyone at this stage and might stick to its original plan to re-list it.
Another possible bidder, Finland's biggest telecom operator Sonera declined to say whether it was considering joining the fray, although an industry source said it would consider a joint bid for Orange, but not in tandem with KPN.
The small Dutch company -- which has powerful joint-venture allies in the form of Japanese cellphone giant NTT DoCoMo and BellSouth Corp (NYSE:BLS - news) of the United States -- has so far played a waiting game, watching to see what France Telecom offers before it makes any move.
Vodafone is not expected to say anything about any offers it may have received for Orange unless it actually agrees one. But if it does succumb to France Telecom's offer it could announce a deal with its full-year results which are due on Tuesday.
France Telecom has all its ducks lined up. It has already agreed terms for a 20 billion pound ($30 billion) loan to help fund its bid and plans to raise $1.9 billion through the sale of its seven percent stake in Telefonos de Mexico.
VODAFONE MAY BE OFFERED 12 PCT FRENCH STAKE
In order to clinch the Orange bid, France Telecom is weighing plans to follow peers such as Deutsche Telekom , Spain's Telefonica and KPN to spin off its cellphone arm, rolling Orange into an enlarged cellphone group.
Such a deal could leave Vodafone, the world's biggest mobile phone company, with around 12 percent of the French group.
``It is unlikely the French could afford the price in cash,'' said one industry source. ``I think that is true of any potential buyer. Therefore, it is quite likely that an offer would contain a significant share of stock.''
Meanwhile, European regulators said on Thursday they would probe any trade sale of Orange to ensure it did not stifle competition.
COST PRESSURES
Although Vodafone initially said it preferred to demerge and re-list Orange around October, costly bids for new generation UMTS (Universal Mobile Telecommunications System) mobile licences across Europe are spurring the need for a quicker deal.
``The fundamental respect in which the world has changed in the last four or five weeks is the price for UMTS licences,'' said one industry source, referring to a high-stakes UK auction that cost bidders more than seven times initial forecasts.
``As a means of raising capital to fund that, an Orange sale clearly makes a lot of sense, but only if the price is right.''
Price is not the only issue for Orange -- run by ambitious Chief Executive Hans Snook and Finance Director Graham Howe.
Orange's top brass -- who are keen to control their destiny after becoming discontented under the helm of Mannesmann -- have vowed that any bidder whose terms they reject will find an empty boardroom. That might wipe billions of pounds off Orange.
Some analysts had thought Vodafone would opt for an Orange re-listing rather than a trade sale because it might otherwise face a capital gains tax bill of several billion pounds. However, these concerns could be exaggerated.
Vodafone shareholders, keen to ensure that Vodafone secures a top price for Orange, are taking a back-seat role and have not yet been contacted.
(Additional reporting by Brett Young in Helsinki, Gillian Handyside in Paris, Kirstin Ridley and Tessa Walsh in London and Karen Iley in Amsterdam)
($1 equals 1.091 Euro) |
